Great pick for a festive tale! I have a feeling I didn't vote for this in the poll, but I'm glad it made it through anyway. We've all been there, right: angsty teenager fed up with stupid family Christmas goes in search of something darker, ends up in way over their head, dives into a river and has to recover in hospital the next day?
Ahem. On a more serious note. To me this definitely read like a "first draft" of "The Shadow over Innsmouth", but not necessarily in a bad way. A man travels to an old New England seaside town in search of something related to his family history. It turns out that his family history is even darker than he thought (though if I'm remembering "Shadow" correctly, that narrator didn't know as much about a dark secret - certainly didn't have ancestors who were hung as witches). It even turns out that his ancestors aren't even human (incidentally, the mask-like face made me think of a trope Lovecraft re-used in "The Whisperer in Darkness). Maybe I'm just being too influenced by the later story, but I do think that non-human is what Lovecraft was going for here, even if it's not as explicit as in "Shadow" and they may or may not be Deep Ones (or proto-Deep Ones). You could read the comment about them coming from the sea either way: they came out of the sea, or they came across the sea from another land. I'd even say that Lovecraft himself was intentionally vague and didn't necessarily know himself what was going on.
I thought the descriptive language throughout was excellent, especially in the opening paragraph and in the cave scene (although as with many Lovecraft stories, there was a bit too much flapping and flopping for my taste...). I even enjoyed the idea of the narrator just sitting down to read the Necronomicon to fill time. The only things that really pulled me out of the story were: the weird description of the creatures the townsfolk were riding to get to the festival - I know Lovecraft was going for something Boschian here, but it was too much for me; and the ease with which the narrator acquired a copy of the Necronomicon again at the end. Again, maybe I'm being too influenced by Lovecraft's later stories, but that just didn't ring true at all. It was basically an excuse to have the narrator read that key passage. A better way to do it, in my opinion, would have been to have him remember having read that passage earlier.
Oh, and this definitely happened by the way. Another way to read the epigraph and connect it to the story is that the townsfolk have put an illusion in place to make Kingsport seem like a regular town and hide what lies beneath the surface. Just because we normal people see the illusion doesn't mean its true.
I really don't have anything to add: it's not very clear what these wizards are, but my first thought was something like Karanthir's idea. But then, maybe I'm also prejudiced by knowing HPL's later tales.
I read this tale, as is already said here also, as an excercise in style. I wonder if Lovecraft had at this point a clear image himself of what these 'deeptime creatures' were; something he elaborated in his later tales. Is it right that Lovecraft at this time still was influenced strongly by Poe? I can't say why exactly (maybe the getting mad, or the gothic descriptions, but not only that) but I feel there is more Poe in here than in, say, The Shadow over Innsmouth.